Interactive Brokers’ Stock Yield Enhancement Program (SYEP)

A

andrew black

I was wondering if people are using and find any value in Interactive Brokers’ Stock Yield Enhancement Program (SYEP).

I am enrolled for about two months and I can see on the statements, under IB Managed Securities Lent Activity, a lot of transactions but almost no income.

For the month of March, Securities_Borrowed_Lent flex query report shows a daily average of $22k (CollateralAmount column) but the sum of NetLendFee which I can see it on the statement as total income is only $1.07.

I also have a big disclaimer telling me that the loan is only protected by the collateral and not by CIPF:

Important Notice re: CIPF Protection for Loans of Fully Paid and Excess Margin Securities: Please be aware that if you execute loans of your fully paid or excess margin securities, the Canadian Investor Protection Fund will not protect you with respect to the securities loan transaction. Therefore, the cash collateral credited to your account by Interactive Brokers (see above) will constitute the only source of satisfaction in the event that Interactive Brokers cannot return the securities.​
 
If you have dividend stocks in a taxable account, you might not want to do it. If you get a dividend payment in lieu, then it will be taxed at a higher rate than if you received the dividend.
 
ET180 said:
If you have dividend stocks in a taxable account, you might not want to do it. If you get a dividend payment in lieu, then it will be taxed at a higher rate than if you received the dividend.
More...
So you assume you get DPIL because of the SYEP.

However that seems not to be the case (see link)...
 
ET180 said:
If you have dividend stocks in a taxable account, you might not want to do it. If you get a dividend payment in lieu, then it will be taxed at a higher rate than if you received the dividend.
More...
Not really a problem. The discussions is about a Canadian account and dividends are taxed at the highest rate anyway.
 
To me, it's a "use-it-or-lose-it" deal. If you are long a stock then you might as well get more out of it but I wouldn't count on it to make money. If I earned some, I earned some but if not, I would've still earned the bulk of the profit from holding the stock. That's how I see it.
 
qwerty11 said:
So you assume you get DPIL because of the SYEP.

However that seems not to be the case (see link)...
More...

No, it is the case and IB warns that can happen:

"Do participants in the Stock Yield Enhancement Program receive dividends on shares loaned?
While the lender of the securities is entitled to receive the amount of all dividends and distributions made on loaned securities, they may receive cash payments in lieu of dividends, commonly referred to PIL. Depending upon one’s holding period for the shares loaned, the receipt of a PIL may have an adverse tax impact for certain U.S. taxpayers as such payments are taxed as ordinary income rather than at the reduced rate associated with qualified dividends. IBKR will attempt to mitigate the payment of PILs by recalling loaned shares prior to a dividend, however, IBKR cannot guarantee that the borrower will be able to return the shares within the necessary time frame to avoid receipt of PIL.

If the account would not be tax disadvantaged by receiving a PIL (for example, an IRA account), Interactive Brokers may intentionally keep your shares out on loan over Dividend Record Date in order to continue revenue generation for your account."

https://ibkr.info/node/1838/

https://www.bogleheads.org/forum/viewtopic.php?t=117477
 
I understand what you want to say. I was a bit short in my response (that you quoted). What I meant is:

You say / imply:

1) If you choose YES for SYEP participation you (can) get DPIL

2) If you choose NO for SYEP participation you don't / cannot get DPIL

Because you warned the TS for tax implications (because of DPIL) when participating to the SYEP.

What I want to say is that point 2 might not be true. In the topic I linked this is discussed, namely it is said that in case of a margin account a broker can lend out the customer shares because (or in case when) the customer bought the shares on margin.
 
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